Leading employment indicator drops again

The federal government's Leading Indicator of Employment fell for the 13th month in a row in May, hinting at a slowing economy.

The index, released by the Department of Jobs and Small Business on Wednesday, noted cyclical employment fell for the second consecutive month in May but that it was too early to confirm that cyclical employment had recently peaked.

The leading indicator is seen as a forward-looking measure and is compiled from a diverse set of data including interest rates, consumer sentiment and Chinese manufacturing activity.

The results recorded a contraction in four of the five components of the indicator, with "weaknesses in consumer confidence, business sentiment and US economic conditions" being partially offset by an increase in the Purchasing Managers' Index for manufacturing output in China.

The leading indicator anticipates movements in the growth cycle of employment but a turning point is only confirmed after six consecutive monthly moves in the same direction.

The calculations precede the Thursday release of the ABS' unemployment rate, numbers keenly awaited by analysts because a slowdown in job growth could spur the Reserve Bank of Australia to cut interest rates.